Insolvent? Chapter 7 Can Cancel your Crushing Debt and Get you to a Better, Brighter Tomorrow!

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Chapter 7 is the fastest, most simple, and least costly bankruptcy to solve your insolvency problem.

According to the Administrative Office of the U.S. Courts, nearly 800,000 bankruptcy petitions are filed each year. Chapter 7 accounts for 68% of these filings.

No one looks forward to filing bankruptcy. Yet, as the U.S. Courts have stated, “a fundamental goal of the federal bankruptcy laws … is to give debtors a financial “fresh start” from burdensome debts.” To achieve this, the U.S. Bankruptcy Code provides several key benefits and protections to alleviate your insolvency woes.

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It Immediately Stops Calls from Creditors and Debt Collectors:

• The court issues an “Automatic Stay” upon receipt of your bankruptcy petition. This prohibits all further attempts of creditors and collection agencies to try and collect on your debt.

• Foreclosures, repossessions, evictions, utility shutoff, and creditor lawsuits in process must stop. And creditors cannot initiate new ones.

• Wage/Income garnishments must cease, and new ones cannot be levied against you. However, alimony, family maintenance, and child support garnishments continue to be levied.

Learn more about The Automatic Stay

You can be debt-free within 4 to 6 months:

• This assumes the court approves your bankruptcy petition and “discharges” (cancels) your debts.

• Other types of bankruptcy filings require 3 to 5 years, or even longer to complete.

• you will no longer be insolvent

• This benefit applies to Individuals and Sole Proprietors. (Chapter 7 does NOT discharge the debts of Partnership and Corporate entity filers. See “Chapter 7 and your business” later in this article.)

You may keep your home, car, and much of your personal possessions in most cases.

• Notice we said, “you may keep”, not “you will keep.” There are limits, conditions, and restrictions on the amount of your value (equity) in this property to keep it. Fortunately, a bankruptcy attorney knows alternatives and “work-arounds” to these limits. In all likelihood, with the help of a bankruptcy attorney, you will keep your home, car, and personal possessions.

You will keep 100 % of your ERISA-qualified retirement accounts

• For example, the Code fully protects your Pension, 401(k), 403(b), 412(e), 457(b) plans, Employer-Sponsored SIMPLE IRAs and Employer-Sponsored SEP IRAs.

• In addition, you can keep your Traditional and Roth IRAs up to a combined total of $1,362, 800. The court-appointed bankruptcy trustee will take the excess over $1,362,800 to pay off creditors.

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The Downside of a Chapter 7 Bankruptcy:

Any bankruptcy will negatively impact your credit rating. But the impact of a Chapter 7 bankruptcy is more severe than for other forms of bankruptcy.

You DON’T get to keep everything!

• EVERY thing you own (other than ERISA-qualified retirement accounts), individually and jointly with your spouse, tangible and intangible, is included in your “bankruptcy estate.“
• Everything you have an expectancy in or an absolute right to own is also included

• All property in the bankruptcy estate is classified as either “exempt property” or “non-exempt property.”

• You get to keep your “exempt property” (e.g., home, car, household goods and personal property) within limits. Your equity in the property must not be greater than an “exemption amount.” If it is, it will be treated as “excess exempt property.” The exemption amount for property is specified in your state’s bankruptcy law.

• The court-appointed trustee will sell your “excess exempt property” and all your “non-exempt property.” The trustee will pay off your “unsecured debt” (e.g., credit card and personal loan) to the extent possible with the sale proceeds.

• Although Chapter 7 eliminates your responsibility for making further mortgage or car payments, it DOES NOT lift the lien. If you are delinquent on your payments, your property can still be foreclosed or repossessed.

And there are other unhappy consequences!

• The trustee will close or sell your business if you own one. (But you may be able to restart it under a new tax ID number.)

• The Chapter 7 bankruptcy will remain on your credit report for 10 years.

• During this period, you will be able to get credit, but it will be harder and more expensive to get.

• Similarly, secured (collateralized) loan agreements will be less favorable, and charge you higher interest.

• Unsecured loans and credit cards will charge you interest at or near the maximum rate allowed by the law in your state. (Secured credit cards operate like a debit card. What you can spend is equal to the amount you pre-pay the issuer.)

• You will have to disclose your bankruptcy for the rest of your working life in certain industries or “sensitive” positions. Likewise, for joining or participating in certain public programs.

All in all, it should be obvious. Yes, Chapter 7 is a fast, effective cure for your insolvency. But you should not pursue it until you have tried all other alternatives to square things with your creditors.

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Besides bankruptcy, often there are other ways to solve an insolvency dilemma. You likely have more options than you know about. Or you may have overlooked them. In either case, you need to explore them all and now is the time to do so.

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If you’re not eligible for, or cannot qualify for a Chapter 13 filing, then …

Am I eligible to file for Chapter 7?

Any Individual, Sole Proprietor, Partnership, Corporation, or other business entity is eligible to petition the Bankruptcy Court for debt relief. However, Chapter 11 is better suited to partnership and corporate filers in most cases. (See “Chapter 7 and Your Business” later in this article.)

• During the 180 days prior to filing the bankruptcy petition, you must NOT have had a prior bankruptcy petition dismissed due to:
  • your willful failure to appear before the court, or
  • failure to comply with court orders, or
  • you voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.
• Individual filers (including Sole Proprietors) MUST complete a credit counseling session, within 180 days before filing. The counseling session must be with a court-approved credit counseling agency, either in an individual or group briefing.
  • You must file with the court any debt management plan developed during the counseling.
• Your “current monthly income” must not exceed:
  • your state’s median income, or
  • an amount allowed under the Code’s “Means Test.” The Means Test includes your average monthly income from all sources over the last 6 months. (However, you can exclude Social Security benefits or payments you received as a crime victim.) Your average monthly income is then reduced by an amount allowed for reasonable, allowed living expenses. Each state determines what are reasonable, allowable living expenses. If your average monthly income is equal to or less than your allowed living expenses plus a small “buffer” amount, you satisfy the Means Test. On the other hand, if your average monthly income is greater than your allowed living expense plus a small “buffer” amount, you cannot file under Chapter 7. But you may qualify to file under Chapter 13.

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What do I get to keep?

The short answer is that you may keep your “exempt” property and you may lose your “non-exempt” property. But what does that mean? To answer this question, you first need to know what is the “Bankruptcy Estate.”

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The Bankruptcy Estate

A Chapter 7 petition must be accompanied by various forms and documentation. One of these forms is the property schedule on which you list EVERY thing that you own. We cannot overstate how critical it is that you are truthful and thorough when completing this and all other required forms. Inconsistencies or omitting property will raise suspicions of fraud and abuse of the law. If true, your petition will be denied. In addition, you could face severe and possibly criminal penalties.

What’s does the bankruptcy estate include?

• ALL real, tangible, and intangible property you own, directly or indirectly, individually, or jointly with your spouse, AND

• If you own a business, the appraised market value of your ownership interest in the business, AND

• Anything and everything you have an absolute right to receive within 180 days of filing for Chapter 7, AND

• ANY property you sold or transferred out of your name within two years (or your state’s time for settlement of fraud transfers, if longer), prior to filing bankruptcy, if:
  • you sold or transferred the property, while you were insolvent, for less than its fair market value, OR
  • the sale or transfer of the property is an attempt to hide it or in whatever fashion, to cheat or diminish the value your creditors would realize in the event of your bankruptcy, OR
  • you deliberately harmed or damaged the property to reduce its value in bankruptcy or in the hands of a lienholder, OR
  • you intended to commit fraud or abuse the bankruptcy law
• Notes:
  • You CAN sell property to pay bills or pay for the basic necessities of life (food, rent, warm clothing, medicine).
  • Typically, the trustee will not try to recover transferred property in which you have no equity, or property you could fully exempt under the bankruptcy law.
  • There is no time limit with fraudulent transfers. Also, fraud will result in denial of your bankruptcy petition and criminal penalties will likely be imposed.
  • If you sold or transferred any property within the last 2 years you are strongly advised to discuss the implications with a bankruptcy attorney.

What does it exclude?

• The Code excludes 100% of your ERISA-qualified plans such as 401(k), 403(b), 412(e), and 457(b), AND

• 100% of your employer-sponsored SIMPLE and SEP IRAs, AND

• $1,362,800 in total for all your Traditional and Roth IRAs. The trustee will take any excess value in your IRAs to pay your unsecured debts.

NOTE: federal law does NOT exclude any portion of NON-spouse inherited IRAs.

Learn how bankruptcy affects your retirement assets

• The federal code also excludes your right to distributions from a Spendthrift Trust

• Most state courts also exclude Social Security benefits.

Federal law uniformly protects excluded property. This means it’s beyond the reach of creditors, and even state laws cannot infringe on this.

All non-excluded property (which is everything else you own or have a right to own) is in the bankruptcy estate. The court-appointed trustee takes legal possession and control of everything in the bankruptcy estate.

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What about my home, my car, my personal stuff? “Exempt” Property”!

The U.S. Bankruptcy Code empowers the court-appointed trustee to gather your property in the bankruptcy estate, sell it, and pay off your unsecured debt. However, the Code does not empower the trustee to leave you destitute. So, as explained above, you keep your income. You also keep your ERISA-qualified retirement accounts.

In addition, the Code also recognizes that certain types of property may be essential to your financial and emotional recovery. Since the purpose of the bankruptcy law is to position you for a fresh start, the courts do not want to strip you of everything you own. Therefore, you can ask the court to exempt (remove) these properties from the bankruptcy estate. The court will approve your request unless your creditors file a compelling objection.

Your state of primary residence determines which types of property are eligible for exemption and the amount you can exempt. In addition, the federal Code also exempts certain property types as well as limits on your value in them. However, you MUST use your state’s schedule of exemptions unless your state law allows use of the federal schedule.

Twenty states give you a choice!

As of August 2021, 20 states permit filers to use either the state’s exemptions OR the federal exemptions. But you cannot “mix and match.” This means that whichever schedule you choose to use, it must be used for all exempt property. Furthermore, making the right choice for you is NOT as simple as you may think. Many filers “shoot themselves in the foot” when making this decision. This is why Credit-yogi.com believes it’s in your best interest to work with a local bankruptcy attorney. They know your state’s law as well as federal law. More important, the bankruptcy attorney knows how this choice will affect your case overall. That means, based on their experience, they will know which the best exempt property schedule is to use in your case.

A sample of federal property exemptions

We will use the federal exemption schedule in the examples below.

Notes:

• The federal Code and most state laws update the exemption amounts every 3 years to adjust for inflation. The next update occurs on April 1, 2022.

• You can double the federal exemption amount IF your spouse joins your bankruptcy filing. However, your spouse’s credit report will also reflect the bankruptcy for 10 years.

Exemption Amount Vs Your Actual Value (equity)

• The exemption amount is the maximum value (equity) you can have in a property you want to exempt. You need to compare your actual value in the property to the exemption amount. But first, you need to calculate your “actual value”(your equity) for each individual item of property you wish to exempt. Here’s how:
  • Market Value of the property
  • minus the amount of any unpaid (secured) loans. (e.g., mortgage, home equity loan, auto loan, boat loan) that have a lien against the property,
  • equals your value in the property

• The court WILL approve the exemption and remove the property from the bankruptcy estate IF your actual value in the property is equal to or less than the exemption amount

• On the other hand, the court will NOT grant the exemption if your actual value in the property is greater than the exemption amount. In that case, the trustee will sell the property. The trustee will reimburse you an amount equal to the exemption amount. However, you may be able to “buy” the property from the trustee by paying the difference between your actual value in the property and the exemption amount. Alternatively, you could convert your case into a Chapter 13 filing if you qualify. Learn about Chapter 13 and see if you qualify.

Here are the more important property types listed in the federal schedule. Also, most states exempt this property as well, either explicitly or through some alternative provision.

The Federal Exemption Schedule

Property Type	Individual Exemption Amount	Joint w/Spouse Exemption Amount
Homestead applies to your primary residence only	$25,150	$50,300
Car applies to your primary vehicle only	$4,000	$8,000
Jewelry	$1,700	$3,400
Household Goods & Personal Property	$625 per individual item, $13,400 in total for all items in this category	$1,250 per item, $26,800 in total
Wildcard Exemption can be used to protect non-exempt property or to increase the exemption amount for an exempt property	$1,325 PLUS up to $12,575 of unused Homestead exemption	$2,650 PLUS up to $25,150 of unused Homestead exemption

So, I can keep my home if my equity is less than the exemption amount, right?

Well … the answer is a definite “it depends!”

Mortgages are “secured debt.” Your home is collateral for the mortgage loan. As such, the mortgage company has placed a lien on your home. This means if you fail to make your mortgage payments, the creditor can foreclose (seize) your home and sell it to recover what you owe them. This is also true for any type of loan where the loan maker has a lien on your property, securing them in the event of your default. Typical examples of secured debt include mortgages, home equity loans, car loans, boat loans, vacation home loans, home equity loan, etc… Therefore, this discussion applies to any type of property that is collateral for a secured loan.

So, to answer the question above…

If your equity in your home is equal to or less than the exemption amount, your home will be exempt. Your home is out of the bankruptcy estate, and the trustee cannot sell it. Even better, the court will discharge your mortgage debt. This means you have no legal obligation to repay your mortgage, and no one can make you do so.

HOWEVER, Chapter 7 does NOT lift the liens on your home, car, or any other property securing a loan.

So, if you are current with your mortgage payments, your home continues to be yours to keep.

BUT, if you are delinquent on your mortgage or home equity loan repayments, the lienholder WILL foreclose, and you will lose your home. Recognize, however, that the lienholder (bank, mortgage company or auto loan financier if your car is exempt) would rather have repayment rather than the property. Since your other debts will be discharged, the lienholder may now be willing to negotiate a new repayment plan with you. Usually, this is better for all, rather than foreclosure or repossession of the property. In this case, you will file a “Reaffirmation Agreement” with the bankruptcy court. This agreement between you and the lienholder means that you are “Reaffirming” this debt and your commitment to repay it. It also instructs the court to NOT discharge this debt. The also applies for any type of property that secures a loan.

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What do I lose? Non-Exempt property!

Your non-exempt property is whatever remains in the bankruptcy estate after removal of the exempt property. Technically, you forfeit all your non-exempt property. The trustee will sell this property. Then the trustee will pay off as much of your unsecured debt as possible with the sale proceeds.

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How does the trustee sell the property?

The trustee must try to sell your property at the best price. But the trustee also needs to sell it within a reasonable amount of time. Therefore, the trustee will use different methods for each type of property in the bankruptcy estate.

For example, the trustee will place a highly marketable house and real estate with a broker. Whereas he or she may auction an abandoned, run-down home. Valuable jewelry, artwork, and collectibles will go to an auction house specializing in those articles.
Also, the trustee may sell a car or boat at a public auction site that specializes in those items. However, if the car or boat is a high value item, the trustee will place it with a specialty broker dealing in those items. The trustee may even sell other, smaller property items in “lots” through an internet auction market. In summary, the trustee will use whatever court-approved methods will get the best price in the shortest time.

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What happens to property that doesn’t sell? ” Trustee-Abandoned Property”

Some property is not marketable. It won’t sell and the trustee is not going to waste time trying to do so. In that case, the trustee will “abandon” the property and it will remain yours. But there’s more!

Earlier we said that the trustee will sell it your “excess exempt property” and pay you the exemption amount. Well, that’s not just a courtesy. The law requires the trustee to pay you the exemption amount before anyone else gets the proceeds. This may influence the trustee to not sell an exempt property. Why?

The answer is “profit”, or more accurately: the lack of it!

The trustee’s sole purpose in selling an item of your property is to raise cash to pay to your unsecured creditors. And that can only happen if the trustee sells the property for a net profit. The trustee pays all fees, commissions, and any taxes from the sales proceeds. In addition, the trustee must pay off any loans (e.g., mortgage, auto loan, boat loan, etc.) secured by the property. Last, but not least, if its “excess exempt property” to be sold, the trustee must pay you your exemption amount. The result is that in many cases, the trustee determines there won’t be any net profit. Or there will not be enough to be worth the effort. In either case, the trustee may abandon the property. Which means you keep it!

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What is the “Meeting of the Creditors?”

The Code requires you to attend a Meeting of the Creditors. (This meeting is also known as a “341 Meeting” named for the section of the Code that requires it.) Typically, this meeting will occur 30 days after the filing of your bankruptcy petition.

The purpose of this meeting is twofold:

• To verify the accuracy and completeness of the information you provided in your filing with the court – especially regarding your property and income
• To prove your identity and screen out a fraudulent filing

You will be under oath during this meeting. The trustee will ask you questions. Creditors may also ask you questions. Typically, the meeting lasts an hour or less. And creditors rarely show up. If they do, they usually have only 10 minutes each, to question you. They probably want to know more about a particular item of property. Or they may want to know why you made a certain purchase or took a certain action just prior to filing. A creditor’s presence is usually a sign that they are considering filing an objection to a property exemption or a discharge of your debt. Your bankruptcy attorney will prepare you and attend this meeting with you.

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A Key Strategic Play

A bankruptcy attorney knows how to use the “Wildcard Exemption” (if your state allows one) to make the sale of a property less profitable for the trustee. That may cause the trustee to abandon rather than sell the property. In which case, you keep the property. In addition, the opportunities are even greater if your state allows you to choose between the federal and state exempt property schedules. But employing this strategy requires much more than good math skills. It requires expertise in the bankruptcy laws. And, most important of all, practical experience. An experienced bankruptcy attorney knows whether a trustee will sell or abandon property under various circumstances. Therefore, it’s to your advantage to hire a bankruptcy attorney.

Give yourself every advantage!

Let Credit-yoci.com schedule you for up to 4 FREE, NO OBLIGATION phone consultations. We’ll connect you with bankruptcy attorneys in your locale. Our Service Representative are available 24/7 to schedule your first phone consultation. Call us! 1-866-964-9644

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Which of my debts will get paid from sale proceeds?

Secured Debt

Secured creditors/secured debt will NOT be paid off in cash by the trustee. The reason is these creditors have a powerful debt recovery tool that other creditors do not have: a lien. Chapter 7 does not “lift the lien” on property. At the close of the bankruptcy proceedings, the secured creditor is “paid” by allowing the creditor to take the property back. This results in foreclosing on the mortgage or repossessing whatever property is securing the loan. In most cases, they will recover most if not all the unpaid loan balance. These creditors have the least risk in the bankruptcy process.

The most common example is your mortgage. A mortgage loan places a lien on your home. If you don’t make your mortgage payments, the mortgagor can foreclose and sell your home to recover most, if not all the unpaid balance of your mortgage. So, if you want to keep your home after bankruptcy, you need to stay current on your mortgage payments. Also, you will have to negotiate a Reaffirmation Agreement with the creditor and file it with the court. This Agreement commits you to paying off the creditor according to the terms you negotiated and stated in the agreement. IT also instructs the court to NOT discharge your debt with that creditor.

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Unsecured Debt

There are two types of unsecured debt: Priority and Non-priority unsecured debt. Neither type will receive any payments unless the trustee is able to sell assets of the debtor and raise cash.

Priority Unsecured Debts will be paid first. These are not loans. They are legal monetary obligations. The more common forms of this type of debt are:

• Alimony, Child Support and Family Maintenance obligations
• Unpaid income taxes that came due during the three years prior to filing for bankruptcy
• Claims for death or personal injury caused by driving under the influence of alcohol or drugs.
• For business filers:
  • wages, salaries, and commissions owed to employees within 180 days prior to the bankruptcy filing
  • contributions owed to employee benefit plans within 180 days prior to bankruptcy filing

Non-Priority Unsecured Debt includes consumer debt (credit cards and personal loans) and medical bills. These creditors will not be paid anything unless all the Priority Debts are paid in full. These creditors will be lucky to get anything from the trustee. In most cases they will get nothing since most Chapter 7 bankruptcies are “No Asset” cases. If the trustee has nothing to sell, there is nothing to distribute to these creditors.

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Which of my debts will NOT get paid?

If yours is a No Asset Bankruptcy, no debts will be paid off. That’s because the trustee has nothing it can sell to raise cash. If there is only enough cash to pay off Priority Unsecured Debt, the Non-Priority Unsecured creditors will get nothing. Student loan debt will not be paid off.

Also, the trustee cannot pay any debt that is not listed in the schedule of creditors filed at the inception of your case. It is critical that your filing include EVERY one of your creditors

Whether or not you continue to be liable for any debt after conclusion of your case depends on whether the debt is “dischargeable.” Other factors may also affect your post-bankruptcy liability.

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A “discharge order” is a court decree that your debt is now cancelled. That means you have no legal obligation to repay the discharged debts. In addition, creditors are prohibited from trying to collect payment from you.

BUT the cancellation of your debts does not “lift” the lien on your secured property.

60 days after your Meeting with Creditors, the court will issue a “discharge order,” unless there are complications. Complications are usually an objection or requested a delay of discharge filed by a creditor. Typically, the court only hears narrowly defined objections such as fraud, failure to disclose property or income, and harm or destruction of property.

HOWEVER, individuals, and sole proprietors are required to complete an approved debtor education course within 60 days after your Meeting of the Creditors. Otherwise, the court will not issue the discharge order (unless an exception is granted). (Hint: The course is only 2 hours. Take it!) You can only take the course from a provider that has been approved by the U.S. Trustee Program.

How do I find an approved provider? You guessed it! Credit-yogi.com 1-866-964-9644. Or you can research an approved provider on the U.S. Department of Justice website.

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Which of my debts will be discharged?

There is an extensive list of debts that the court can discharge. However, a dischargeable debt will NOT be discharged if you committed fraud, willfully failed to disclose property or income, or attempted to hide or harm property.

Typical debts that will be discharged include:

• credit card balances, personal loans, revolving charge accounts, and other consumer debts
• unpaid medical bills, past due rent, and past due utility bills
• business debts of an individual or sole proprietor
• income taxes and penalties 3 or more years overdue, real estate taxes more than 1 year overdue
• auto accident claims (but not those due to alcohol or drugs)
• civil court judgements (unless based on fraud)
• attorney fees (but not for alimony or child support)

But you may forfeit the discharge of your debts if any of the following apply.

A creditor, bankruptcy trustee, or the U.S. trustee can request the complete dismissal of your case. If the court agrees, it can deny your entire case for any of the following reasons. In that case, you are liable for all your debts without protection of the bankruptcy laws.

• Failure to comply with the rules, orders, or requirements of the court
• You did not produce requested records, hid, or destroyed them
• Failure to complete the required credit counseling or debtor education courses
• You transferred, hid, or attempted to hide property, or cannot account for lost assets
• At any time during your case, you lied under oath or committed fraud in any manner
• You previously filed for bankruptcy and recently received a discharge of your debts. “Recently” depends on the bankruptcy chapter you previously filed. It can range from 2 to 8 years.

In addition, creditors can ask the court to not discharge any of the following:

• purchases of “luxury” items totaling $725 or more, within 90 days of filing for bankruptcy (the court will presume this as fraudulent debt)
• debts based on fraudulent or false pretense application (false statement of income on credit card or loan applications)
• cash damages owed to someone you willfully injured
• cash advances received within 70 days of filing for bankruptcy

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Which of my debts will NOT be discharged?

There is an extensive list of debts that the court will not discharge. For most of these, to do so, could encourage behavior that is contrary to the public good. For others, it’s just a matter of public policy. Here are the more common of these. Your bankruptcy attorney knows which of your debts cannot be discharged.

• debts you incur after your bankruptcy petition is filed
• debts not listed on the Schedule of Creditors files with the court
• alimony and child support debts
• student loans
• condominium and cooperative housing fees and homeowner association fees
• income taxes and penalties less than 3 years in arrears, real estate taxes less than 1 year in arrears
• debts for personal injury for driving while intoxicated
• unpaid government fines and penalties
• unpaid court fines, penalties, and restitution for a criminal activity

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WATCH OUT FOR THIS UNEXPECTED, UNWELCOME SURPRISE: Co-signors and guarantors of a discharged debt remain liable for the discharged debt!

You filed for Chapter 7 and the court discharged all your debts. The discharge included a $10,000 loan you used to pay for a family cruise to Bermuda. Your credit was not so good, so, your brother-in-law graciously agreed to co-sign the loan. SURPRISE!!! Although you are no longer responsible for this loan, your brother-in-law is. The creditor can and will sue him for repayment of your loan.

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Sole Proprietorships

A sole proprietorship is NOT a distinct, legal entity under the law. Rather, it is an individual who chooses to do business under a trade name. The sole proprietorship’s debts are, legally, the personal responsibility of its owner. If the business debts become overwhelming, its owner can file under Chapter 7, as an individual and include the business debt as his/her own. Nothing in this article differs if the debtor operates sole proprietorship.

Partnerships, Corporations, and LLCs

Businesses, other than sole proprietorships, ARE distinct legal entities. This means that these businesses are legally separate from their owners. The business can file for bankruptcy for itself without affecting the credit or assets of its owners theoretically.

Chapter 7 seldom makes sense to solve a business entity’s insolvency.

There are several reasons for this:

• The trustee takes over the business and sells all the assets. Chapter 7 is a way to go out of business, not stay in business.
• The court does NOT discharge unpaid debts. This is because the business is closed. The business no longer exists. However, creditors will pursue every legal means to collect the debt from the personal assets of the business owners. The creditors will easily succeed if the owners co-signed or guaranteed loans for the business. For all other unpaid corporate debts, the creditors will claim the owner mismanaged the business into bankruptcy or committed some fraudulent acts. If true, the owner may very well be liable for the debt. Regardless of whether owners are justly liable, it will cost a lot of money to defend themselves.
• The debts of any form of partnership are not discharged. If the business is a general partnership or limited partnership, its owners are personally liable for the partnership’s unpaid debt. If the business is a Limited Liability Partnership, state law determines whether its partners are liable.

For all the above reasons and more, filing under Chapter 11 or 13 is much more advantageous for any type of partnership and corporation. Chapter 13 is an easier, faster, and less expensive process than Chapter 11. However, business entities cannot file for Chapter 13. But, if the business owners are going to be liable for the business debt anyway, they can file as individuals under Chapter 13 and include the business debt.

Does it ever make sense for a business entity to file under Chapter 7?

Sometimes the business owner(s) expect there will be hostile challenges or claims from an ex-spouse, or former co-owner of the business, or from a creditor owed a large debt.

Chapter 7 is a transparent process. A case trustee will take possession of the bankruptcy estate property once the bankruptcy petition is filed with the court. At that point, the trustee is responsible for the property and its liquidation. The owner is out of the picture. This reduces the owner’s exposure to potential claims of mishandling or fraud in connection with the liquidation of the property.

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What will it cost me?

Chapter 7 is the least costly type of bankruptcy to cure your insolvency woes. You will incur court fees, administrative fees, and attorney fees. Typically, these will total between $1,000 and $2,000 depending on how many creditors you owe.

How can I pay these costs if I’m broke?

The U.S. Courts and many attorneys offer payment plans. Also, there are organizations that may help you with your legal fees. Find out more at What IF I Can’t Pay for My Bankruptcy Costs?

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Can’t I file for Chapter 7 myself?

Yes, you CAN file for Chapter 7 yourself. (It’s called filing “Pro Se.”) Know what else? You can mow the lawn with your teeth, too! However, we have it on particularly good authority that once you start either of these, you will quickly find the process equally “distasteful.”

You don’t want just a good outcome from your case. You want the best possible outcome. How successful your case is, can be measured in two ways. How much of your debt gets cancelled? And how much of your property do you keep? Sure, you can file yourself, follow all the rules and procedures and get a good result at the end. But it’s almost certain the result will not be as good as it could be. You see, the best possible result comes only partly from knowing the law, rules, and procedures. Just as important, if not more, is experience. A local bankruptcy attorney knows the bankruptcy court that will hear your case. The attorney’s “insider’s” guidance, insights, and recommendations are worth more in terms of better results than what you think you save by filing yourself.

But don’t take our word for it. Here’s what the U.S. Courts has to say about why you should hire a bankruptcy attorney.

How do I find the “right” attorney for me?

GREAT question! Credit-yogi.com explains why and how to hire the “right” kind of attorney to handle your case. Credit-yogi.com will put you in touch with up to four bankruptcy attorneys in your area who will answer your questions in FREE, NO OBLIGATION phone consultations. Our Service Representatives are here for you 24/7 to schedule your first free consult. Call now! 1-866-946-9466

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First and foremost, be kind to yourself!

If you’re here for reasons other than reckless, compulsive spending, you’re not to blame. Likely, you could not have foreseen or prevented the event or reason that put you into this situation. You’ve already taken the first step (reading this article) towards getting back on your financial feet. Feel good about what you’re now doing and look forward to your fresh start.

If you are here because your credit cards seldom saw the inside of your wallet … well … learn the lesson of your past habits but move on. You can get your fresh start. Make the most of your new opportunity.

Filing for bankruptcy is a serious matter.

On the other hand, insolvency is an even more serious. We’ve done our best to make you aware of the negative aspects of Chapter 7. And we suggested alternative strategies to relieve your insolvency issues. You don’ want to pursue Chapter 7 until you’ve tried all the alternatives. But when everything else just doesn’t work, Chapter 7 can be your lifesaver.

You need to begin repairing your credit as soon as you receive your discharge order!

Chapter 7 replaces your insolvency problem with a credit problem. Chapter 7 stays on your credit record for 10 years. Oh, you will be able to get credit, including a credit card. But the terms will not be favorable, and the interest rate will be at or near the maximum allowed by law. That’s the real cost of a Chapter 7 bankruptcy.

However, there are things you can do to lessen the impact. You can make your credit look good in less than 10 years. You just need to know what to do and how to do it. Credit-yogi.com offers a wealth of free information and guidance to help you with the rebuilding process. We have helped thousands of people, post-bankruptcy, for nearly 18 years.

So, whether you are trying to avoid bankruptcy, pursuing bankruptcy, or recovering from bankruptcy…

Now is the time for smart decisions and even smarter moves! Calling us could be your smartest decision and best next move!

Our Service Reps are here for you 24/7. 1-866-964-8644

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